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CIRCULAR No. 92/2004/TT-BTC OF SEPTEMBER 16, 2004 GUIDING THE APPLICATION OF TAX PREFERENCES TO EXPANDED UONG BI POWER PLANT PROJECT AND CA MAU POWER PLANT PROJECT

Pursuant to the current Tax Laws and Ordinances and their guiding documents;

Pursuant to the Prime Minister's Decision No. 358/QD-TTg of April 13, 2004 on the experimental application of a number of tax policies to expanded Uong Bi power plant project and Ca Mau power plant project;

The Finance Ministry hereby guides the application of the tax preferences to expanded Uong Bi power plant project and Ca Mau power plant project as follows:

I. SUBJECTS OF APPLICATION

Vietnam Machine Assembly Corporation (the main contractor performing the EPC contract and hereinafter referred to as LILAMA), its member units (hereinafter referred to as the member units for short), domestic and foreign sub-contractors (including contractors for construction, manufacture, installation and supply of machinery, equipment and/or goods, which sign contracts directly with LILAMA, and are hereinafter referred to as the sub-contractors for short) which take part in the implementation of expanded Uong Bi power plant project and Ca Mau power plant project (hereinafter referred to as the projects for short) shall be eligible for the application of the tax preferences under the guidance in this Circular.

II. TAX PREFERENCES

1. Value added tax (VAT), import tax and import goods surtax preferences:

1.1. Goods which are exempt from import tax, exempt from import goods surtax (if any) and not subject to VAT when being imported:

Goods which are imported to create fixed assets for the projects (hereinafter referred to as goods for short) and of those types that cannot be produced at home yet or that have been produced at home but are not up to the technical standards shall be exempt from import tax, import goods surtax (if any) and shall not be subject to VAT, including:

Equipment, machinery, special-use transport means;

- Components, details, knocked-down parts, spare parts, models, fittings, accessories accompanying equipment, machinery, special-use transport means;

- Raw materials, semi-finished products, supplies used for the manufacture of equipment and/or machinery in technological chains or for the manufacture of components, details, knocked-down parts, spare parts, models, fittings, accessories accompanying equipment and/or machinery;

- Construction materials.

1.2. Certification of the detailed list of tax-free import goods

Basing themselves on the list of goods which can be produced at home, promulgated by the Planning and Investment Ministry; the list of goods which can be produced at home but are not up to the technical standards, promulgated by the Industry Ministry; technical designs and implementation progress of the projects, the investors (Vietnam Electricity Corporation for expanded Uong Bi power plant project; and Vietnam Oil and Gas Corporation for Ca Mau power plant project) shall certify the detailed lists of quantities and categories of goods to be imported for the projects, then send them to LILAMA.

Basing itself on the Trade Ministry's written approval of the total value of goods permitted to be imported free of tax for each project; the detailed lists of quantities and categories of goods to be imported for the projects certified by their investors, contracts signed between LILAMA and its member units and sub-contractors taking part in the project implementation, LILAMA shall certify the detailed list of quantities, categories and values of goods imported under each contract for each member unit or sub-contractor, then send one original to each member unit or sub-contractor. The value of import goods stated in the detailed list certified by LILAMA for member units and sub-contractors shall constitute a part of the total value of tax-free import goods approved by the Trade Ministry for each project.

The detailed lists certified by the investors for LILAMA and the detailed lists certified by LILAMA for its member units and sub-contractors shall serve as basis for the customs offices to carry out tax-free import procedures for enterprises.

1.3. Customs procedures and dossiers for tax-free import goods:

1.3.1. Customs procedures:

LILAMA, its member units and sub-contractors involved in import of goods for the projects shall only be entitled to register for opening of customs declarations at a customs office most convenient for enterprises.

Basing itself on the detailed lists of quantities and categories of import goods for the projects certified by their investors and the Trade Ministry's written approval of the total value of import goods exempt from taxes for each project produced by LILAMA, the customs office where LILAMA registers for opening of customs declarations shall grant to LILAMA cards for monitoring and reconciling the import goods value.

For cases where member units and sub-contractors import goods for the projects, each unit shall, when filling in the import procedures, have to produce to the customs office where LILAMA registers for carrying out the customs procedures one dossier set comprising:

- The import contract of the member unit or sub-contractor;

- The detailed list of quantities, categories and values of goods imported for the project under the above-said import contract, certified by LILAMA.

- The detailed list of quantities, categories and values of goods imported for the project, certified by the investor for LILAMA.

- A card for monitoring and reconciling the value of import goods granted by the customs office to LILAMA.

- An application for extraction of import goods under the contract of the member unit or sub-contractor.

LILAMA shall have to supply its member units and sub-contractors with the detailed list of quantities, categories and values of import goods used for the project, certified by the investor and cards for monitoring and reconciling the value of import goods.

Basing itself on dossiers produced by member units and sub-contractors, the customs office shall make reconciliation of the import goods value in monitoring cards and give certification in the applications for extraction of import goods for member units and sub-contractors. These applications for extraction of import goods shall be handed to the member units and sub-contractors for carrying out the customs procedures at places where such units have registered for opening of declarations.

1.3.2. Customs dossiers:

The subjects mentioned in Section I of this Circular, including enterprises with the import business function and having signed import entrustment contracts with LILAMA, when importing tax-free goods mentioned in Item 1.1, Point 1, Section II of this Circular, must fully have, apart from the customs dossiers prescribed at Point 2, Section II of the Finance Minister's Decision No. 56/2003/QD-BTC of April 16, 2003, the following documents:

- For cases where LILAMA directly imports:

+ The Trade Ministry's written approval of the total value of supplies and equipment permitted for tax-free import for the project;

+ The detailed list of quantities and categories of tax-free import goods for the project, certified by Vietnam Electricity Corporation or Vietnam Oil and Gas Corporation.

For cases where LILAMA entrusts other importers to import, such entrusted importers must also have import entrustment contracts.

- For member units and sub-contractors which import:

+ The detailed list of quantities, categories and values of goods imported for the project under import contracts certified by LILAMA.

+ The applications for extraction of import goods for contracts already certified by the customs office where LILAMA carries out the customs procedures.

Customs offices where enterprises register for opening of declarations shall have to inspect actually imported goods and compare them with their dossiers for determining whether they are entitled to tax exemption under the guidance in this Circular or not, and certify the exemption of import tax and surtax (if any) and the non-payment of value added tax.

1.4. Retrospective tax collection:

In cases where the tax-free import goods are used for other purposes than the tax-free purposes, their importers shall have to declare and fully pay import tax and surtax (if any) and value added tax amounts exempted upon their import. More concretely as follows:

- If the use purpose change is permitted by the competent State agency, the time limit for tax declaration shall be 2 working days after the competent State agency's decision permitting the purpose change takes effect. The time limit for tax payment is 10 days as from the date inscribed in the customs office's decisions on retrospective tax collection.

- If the use purpose change is permitted by the competent State agency but importers fail to make tax declarations for tax payment or use import goods without permission for other purposes than the tax-free purposes, and are inspected and detected as having committed such violations, they shall, apart from fully paying tax amounts exempted upon the import, be imposed with fines equal to between one and five times the evaded tax amounts, depending on the nature and seriousness of their violations. The time limit for tax declaration is 2 working days as from the date of inspection and detection. The time limit for tax payment is 10 days as from the date inscribed in the customs office's decisions on retrospective tax collection.

2. Enterprise income tax preferences

LILAMA and its members units implementing the projects shall enjoy the enterprise income tax rate of 20% for incomes from the project implementation. LILAMA shall have to separately monitor and account income portion from the project implementation for enjoyment of the tax rate of 20%. Where the units fail to separately account such income amounts, the tax rate of 28% shall apply.

The accounting of turnover and expenses for determining taxable income earned from the project implementation shall comply with the provisions of the Enterprise Income Tax Law and the current guiding documents, concretely:

Turnover for calculating taxable income is the total VAT-exclusive money amount paid by the investor to LILAMA for the project implementation according to the completed volumes (for work volumes directly performed by LILAMA). For work volumes performed by member units with independent economic accounting, the turnover is the VAT-exclusive money amount paid by LILAMA to its member units for the project implementation.

Reasonable expenses shall be accounted according to the following principle: Those expenses in direct service of the projects shall be accounted directly into the projects' expenditures, while indirect expenses shall be distributed in proportion to their actual turnover ratios.

III. ORGANIZATION OF IMPLEMENTATION

This Circular takes effect 15 days after its publication in the Official Gazette. Any problems arising in the course of implementation should be reported by concerned units to the Finance Ministry for timely solution.

For the Finance Minister

Vice Minister
TRUONG CHI TRUNG